Tableau's Q3 Paints A Troubling Picture As Revenues Fall Short

Brian White of Drexel Hamilton has downgraded Tableau Software Inc DATA to Hold from Buy following the tepid third-quarter revenue and “chilling” outlook that suggests the company has lost its competitive advantage in the crowded cloud market.

Mixed Q3

Tableau reported third-quarter sales of $206.1 million, which missed Drexel Hamilton's estimate of $213.2 million and the Street's estimate of $213.8 million, due to an extended sales cycle on large U.S. market deals and weakness in EMEA. However, pro forma EPS of $0.16 beat the firm's projection of $0.05 (consensus was at $0.07).

“Tableau's quarterly stumbles now appear more symptomatic of a company that has lost its competitive edge in a sea of larger IT/cloud vendors that offer abroad array of solutions with more attractive price points,” White wrote in a note.

Tableau added over 3,600 new customer accounts in the third quarter and slightly below the low-end of Drexel Hamilton’s 3,650 to 3,750 estimate. The company closed 360 transactions with sales over $100,000 during the quarter and slightly below the low-end of DH’s 365–382 estimate.

Estimates And Expectations

For the fourth quarter, Tableau expects revenue of $225 million to $235 million with EPS of $0.09 to $0.16. White cut his fourth-quarter revenue forecast to $232.6 million from $254.7 million (Street is at $250.1 million) and lowered his pro forma EPS estimate to $0.14 from $0.23 (Street is at $0.20).

For 2017, the analyst slashed his revenue estimate to $877.6 million from $1.017.6 billion and cut pro forma EPS projection to $0.18 from $0.54 (vs. Street is at $0.50).

“Overall, we found the tone of the call to be downbeat with the combination of macro weakness, the headwinds of a higher mix of ratable sales, execution issues and the more competitive market hanging over the story,” White added.

At the time of writing, shares of Tableau had plunged 12.83 percent to $43.16.